Planning for kids
Contents
Cashflow tips
when starting
your family
So you’ve just become a parent or are thinking about starting a family. It’s such an amazing time in your life. No doubt you’ve got plenty of emotions swirling around; excitement, anticipation, absolute happiness. But it can also be pretty daunting, especially as your mind moves to the financial reality of bringing up your child.
As planning for the cost of kids is one of the most common areas of our financial advice, we asked our Tribeca Tribe for their top cashflow tips.
Lets start with their top 8.
1.Begin saving for education with early investments
Something that new parents often don’t know about or consider too late is an investment or education bond. These offer a lot of tax benefits (regardless if you redraw for education or on-education purposes) but they do need to be set up 10 years before the money will be used to get full advantages. They are a great way of saving for these costs, as you can make regular contributions and start with as little as $1,000.
If private school is in your plans, read our article on tips for affording private school fees.
2. Be clear on all your entitlements (parental leave, childcare, etc)
If one or both of the parents are taking parental leave, understand what that means for any income protection cover that might be in place. This also includes understanding the impact of an employer’s parental leave policy. The same goes for Centrelink’s paid parental leave. The other part to this is also estimating how returning to work will impact childcare costs.
Not sure of your parental leave entitlements? See Services Australia.
3. Prioritise family and connection
Don’t fall for the trap of competing to maximise your lifestyle on ‘stuff’ that doesn’t matter. Always put family and connection first, even if it means living in a less affluent area, driving an older car, or travelling to less expensive destinations. With good planning you can still have most of the stuff, but never at the expense of family.
4. Understand
your new cashflow position
As a new parent you will be spending more and earning less. You need to plan for how your day-to-day living expenses will be different with extra costs such as nappies, food, clothing and medical services. And you need to factor in initial big ticket items like a pram, car seat, bedroom furniture and so on.
For more cashlow tips, read our six golden rules for managing money.
5. Maintain super contributions while on parental leave
One of the points that’s often forgotten is making sure that when the parent/s go on parental leave, their super isn’t neglected. There are many options you may be able to consider, like taking advantage of spouse contributions to give the higher earner a tax offset. Or looking into government co-contribution or contribution splitting to make sure you don’t miss out on contributions if not working full time.
6. Plan for expected and unexpected expenses
Planning is critical, from forecasting cashflow BEFORE the baby arrives to thinking about the practicalities of childcare taking in the costs, hours, availability and contingencies when the baby is ill. You have to be prepared for the knowns, and the unknowns.
7. Home upgrade plans should align with borrowing capacity
If upgrading the home is likely, set realistic expectations with your borrowing capacity. While the home you’re in might suit you and your partner now, will it still suit when you have a 4-year old running around? Understand that your borrowing capacity may be impacted, so set yourself realistic expectations for what you will be able to borrow for the family home you imagine.
8. Talk to your financial advisor early
Ensure you get in contact with your financial advisor early to create a plan; don’t wait until after the birth.
Plan ahead as much as you can to prepare for the cost of having a child. This includes creating a ‘buffer’ savings account in preparation for non-paid maternity or paternity leave and/or reduced return to work. It’s the perfect time to meet with a financial advisor to create and execute your plans for the short and long-term. Don’t wait until after the baby arrives.
Book in an obligation free ‘get to know you’ call with one of our advisors.
More practical tips
And here’s some more practical tips from the most recent new parents in our Tribe.
Rob Devlin, Head of Advice/Partner
One of the biggest traps is spending a lot of money on things like toys that your baby or toddler either doesn’t need or want, or grows out of it before you know it. Consider buying some items second hand on places like marketplace rather than brand new to save some cash.
Ben Jongebloed, Advisor
A big one from me is being really clear on hospital costs. It’s important to understand the difference in out of pocket costs between public and private, and allowing for either. If going private, make sure you have the right private health insurance. Also, be mindful of what baby ‘gadgets’ you buy as this can quickly blow the budget.
Matt Rea, Senior Advisor/Partner
My best piece of advice is don’t buy things before you need them. There are so many things that we were considering buying, but didn’t, and are now thankful that we didn’t get sucked into buying them because ‘we might need that’. As family and friends are always looking for baby suggestions, Amazon offers a great ‘baby wishlist’ you can take advantage of which gives a 10-15% discount for eligible baby items if you put it on that list
Tribeca is committed to helping you live your Good Life, especially when you’re starting or growing your family. We’d love to talk about how we can enhance your financial wellbeing to achieve your dreams and goals. Please speak to one of our Tribe today.